Nearly 13.8 million homeowners in the U.S. were in negative equity at the end of 2012 — down from 15.7 million in the fourth quarter of 2011, real estate website Zillow reported Feb. 21 in its Fourth Quarter Negative Equity Report.

The report looked at current outstanding loan amounts across the nation for individual owner-occupied homes and compared them to those homes' current estimated values.

During the fourth quarter, 27.5 percent of all homeowners with a mortgage were underwater, compared with 31.1 percent one year ago. Zillow reported that nearly 2 million homeowners were freed from negative equity over the course of the year.

A jump in home values coupled with continued high foreclosure rates were responsible for the drop in negative equity. Zillow reported that national home values rose 5.9 percent year-over-year in 2012 to a median value of $157,400.

“As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous,” Dr. Stan Humphries, Zillow chief economist, said in a news release. “Freed from negative equity, homeowners will have more flexibility, and some will likely choose to list their home for sale, helping to ease inventory constraints and moderating sometimes dramatic, demand-driven price increases in some markets.”

Among the nation's 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099 homeowners freed in 2012); Los Angeles (72,936 homeowners freed); Miami-Fort Lauderdale (70,484 homeowners freed); Dallas-Fort Worth (59,461 homeowners freed); and Riverside, Calif. (58,417 homeowners freed).

Zillow predicted that the negative equity rate among all homeowners with a mortgage would fall to around 25.5 percent by the fourth quarter of 2013, freeing an additional 999,000 homeowners from being underwater on their homes.

Read Zillow’s Fourth Quarter Negative Equity Report.